Shrimal, J. - (1.) THESE two applications filed under Section 256(2) of the I.T. Act, 1961, at the instance of the assessee, raise identical questions and can, therefore, be disposed of by one order.
(2.) D.B. Civil Income-tax Case No. 69 of 1976, M/s. Hemandass Dhanrajmal (Khari Feeder Project, Jaipur), claimed the status of a registered firm for the assessment year 1966-67. The following persons were declared to be its partners : 1. Shi Hemandass, 2. Shri Choith Ram, Shri Hukmat Rai, Shri Daulat Ram, Shri Minohmal, Shri Chaturdas. 3. The first four partners constituted the main firm, M/s. Hemandass Dhanrajmal. By order No. 71 WT (KAD 2628), dated March 10, 1965, the Superintending Engineer, Irrigation, Udaipur, gave a contract of digging work relating to Khari Feeder Aqueduct to the firm, M/s. Hemandass Dhanrajmal. The four partners of this firm, being busy with other works, took with them the fifth and sixth partners as working partners. The newly constituted partnership was to commence the work from March 20, 1965. It was to execute the contract work of Khari Feeder Project. Clause VI of the partnership deed embodies that the capital of the firm was to be provided by the main firm. Clause VIII shows that the 5th and the 6th partners were introduced as working partners. Their share in profit and loss was at 30% each. The bills were to be prepared and payment was to be received by the first four partners and the expenses required to be incurred for the execution of the work were to be paid by the partners of the main firm to partners Nos. 5 and 6 of the assessee-firm. 4. The assessee-firm applied for its registration in the prescribed form on March 30, 1965. The ITO doubted the genuineness of the firm. In that connection, he examined Minohmal and Chaturdas. Chaturdas admitted that he had been working as munim with M/s. Hemandass Dhanrajmal on a monthly salary of Rs. 35 for the last 8 or 10 years. Analysing the statements of Minohmal and Chaturdas and contradictions in their statements together with human probabilities, the ITO concluded that the newly constituted firm was not an independent firm and was controlled by the main firm. He, accordingly, refused registration to the firm. 5. On appeal, the AAC upheld the findings of the ITO. The AAC held that there were no sufficient reasons to hold that the contract was carried out by a separate and distinct entity from the main firm, M/s. Hemandass Dhanrajmal. The assessee went up in appeal to the Income-tax Appellate Tribunal, but without success. An application was made to the Tribunal for making a reference to the court under Section 256(1) of the Act of 1961 (to be referred to hereinafter as "the Act"). The Tribunal declined to do so on the ground that no question of law was involved. The assessee now asks us to direct the Tribunal to refer the following questions of law to this court : "(a) Whether, on the facts and in the circumstances of the case and on a proper appreciation of the evidence and material on record, the Tribunal was right in holding that the working partners were dummies/ benamies and that the firm is not entitled to registration under Section 185 ? (b) If the answer to the first question is yes, then, whether, on the facts and in the circumstances of the case, the firm was entitled to registration ?" 6. D.B. Civil Income-tax Case No. 269 of 1975, M/s. Hemandass Dhanrajmal (Jawahar Sagar Project), had claimed the status of a registered firm for the assessment year 1968-69. The assessee's case was that the alleged firm came into existence, vide partnership deed dated March 25, 1967. The following persons were declared to be its partners : 1. Hemandass, 2. Hukmatrai, 3. Daulatram, 4. Lekhraj, 5. Kalidass.
(3.) THE first three partners were the partners of the main firm, M/s. Hemandass Dhanrajmal. THE main firm obtained a contract from the irrigation department to execute the works known as Jawahar Sagar Project. THE three partners, namely, Hemandass, Hukmatrai and Daulatram took two new partners, Lekhraj and Kalidass. THEy were given only supervisory work over the labour employed by M/s. Hemandass Dhanrajmal on the works to be performed on Jawahar Sagar Project. Admittedly, no capital was to be invested by either Lekhraj or Kalidass. Each of them was given 25% share in the profit and loss to be incurred by the firm in execution of the work of the project. THE newly introduced partners were made responsible for maintaining the accounts, make payment of the amount received from partners Nos. 1, 2 or 3 to the labour. THEy were also not authorised to prepare the bills and receive the payments. THE assessee-firm was registered with the Registrar of Firms, Rajasthan, Jaipur, as No. 904/67 on June 26, 1967. THE assessee-firm then applied for registration of the firm under Section 185 of the Income-tax Act, 1961. THE ITO doubted the genuineness of the partnership firm. He recorded the statements of Lekhraj and Kalidass (two newly introduced partners) on July 26, 1971. Hemandass was also examined on the same date. THE ITO came to the conclusion that neither Lekhraj nor Kalidass had any earlier experience of technical nature or of administrative nature in irrigation contract work. THEy were simply performing the functions of a mistry. No capital was invested by them. THEy could not even read the partnership deed. THEy did not know whether M/s. Hemandass Dhanrajmal maintained any accounts or not. THEy had no knowledge about the account books and from their statements it appears that no account books were maintained by them. He further held that no separate bank account for the concern, M/s. Hemandass Dhanrajmal (Jawahar Sagar Project) was kept. THE irrigation department had given the contract to M/s. Hemandass Dhanrajmal and there was no sanction obtained by the so-called newly constituted firm for getting the contract transferred in its name. On the basis of the above findings and other facts, noted by him in the assessment order, learned ITO, Special Ward II, Jaipur, rejected the application for registration, filed by M/s. Hemandass Dhanrajmal (Jawahar Sagar Project). On appeal, the AAC, A-Range, after examining the record afresh, affirmed the findings of the ITO. He further observed that in the past also M/s. Hemandass Dhanrajmal had been following exactly the same modus operandi in the assessment year 1965-66. The assessee constituted a firm in the name of M/s. Hemandass Dhanrajmal (Birach River Project) and in the assessment year 1966-67, it constituted a firm in the name of M/s. Hemandass Dhanrajmal, although the aforesaid firm was similarly found to be non-genuine and the income was added to the main firm. He also held that the introduction "of two dummy partners, who were neither allowed to operate the accounts nor were required to contribute any capital and the registration regarding sub-letting of the work, when considered with other proved circumstances of the case, clearly indicated that the firm was a bogus one. It was non-genuine and was only a branch of the main firm created with a view to divert its profits. With these observations the appeal was dismissed. The assessee went up in appeal before the Income-tax Appellate Tribunal, Jaipur Bench, but without success. An application was moved before the Tribunal for making a reference to this court under Section 256(1) of the Act. The Tribunal held that in the appellate order the details based on sufficient material were given and the finding stood well supported by documentary as well as oral evidence and that no question of law arose from the order of the Tribunal. It, accordingly, declined to refer any question to this court. Aggrieved by the order of the Tribunal, the assessee has come to this court and wants us to direct the Tribunal to state the case and refer the following questions : "(a) Whether there was any positive material with the Tribunal on the basis of which the Tribunal can legally hold that the assessee partnership was not formed, did not exist, did not carry on the contract business and was non-genuine ? (b) Whether, on the facts and in the circumstances of the case, the Tribunal was right in refusing to grant the claim of registration ?" ;